Guyana's oil earnings could exceed G$6.7 trillion by 2035 -IDB
By Guyana Chronicle
Petroleumworld 11 12 2021
A REPORT compiled by the Inter-American Development Bank (IDB) early this year shows that earnings from Guyana’s oil and gas sector could reach US$31 billion (roughly G$6.7 trillion) by 2035.
The IDB report, titled ‘Economic Institutions for a Resilient Caribbean,’ outlined that Guyana’s population of approximately 780,000 suggests that the level of reserves equates to 10,250 barrels per person.
Guyana’s Natural Resources Fund currently stands at US$534 million
“Although this measure is lower than that of Kuwait with 24,000 barrels per person), it is higher than that of the United Arab Emirates with 10,100 barrels per person, Venezuela with 9,500 barrels per person, and Saudi Arabia with 8,100 barrels per person, making Guyana one of the richest countries in petroleum reserves in the world,” the IDB report said.
It also highlighted that similarly, ExxonMobil has announced plans to reach a production rate of at least 750,000 barrels per day, which would make Guyana the largest oil producer on a per capita basis in the world.
For October 2021 alone, Guyana earned in excess of US$20.4 million in oil profits; that, coupled with royalties and interest, brings the balance of the Natural Resources Fund (NRF) to US$534 million.
The fund, lodged in the Federal Reserve Bank in New York, remains untouched owing to loopholes in the NRF legislation which was passed in January 2019 by the then A Partnership for National Unity + Alliance For Change (APNU+AFC) government.
When the Dr. Irfaan Ali-led government assumed office in August 2021, efforts commenced to amend the act to ensure that withdrawals from the fund are transparent and in keeping with international fiscal regulations.
It was only recently that the Ministry of Finance lamented the issues plaguing the NRF. More specifically, the ministry pointed to the very IDB publication which noted: “The fund on its own cannot achieve the objectives that have been set for it. The rigid withdrawal rules may do little to foster stabilisation or saving, but may entail fiscal costs.”
The IDB report also outlined that the formula for the maximum permissible withdrawal is among the most complex operational rules for a resource fund in the world. “Its design departs from good practices,” the IDB argued.
The report related: “State-of-the-art advice based on international experience and good fiscal management principles emphasises simplicity, flexibility, transparency, and close integration with the budget and public asset-liability management,” and that the rule’s complexity may also “conspire against fiscal transparency and public understanding.”
The Finance Ministry reminded that the People’s Progressive Party/ Civic (PPP/C) did not get to make proper contributions to the contents of the NRF Act, since it was “rushed through the National Assembly” by the APNU+AFC, which was already nullified by the passage of the December 2018 No-Confidence Motion (NCM).
“In total disregard for the clear consequences that are constitutionally due to flow from a NCM, Jordan’s government rushed, in January 2019, to sneak the NRF Bill through Parliament with no opposition participation and no opposition input. Here again, his letter is replete with brazen misrepresentations,” the ministry posited.
The Finance Ministry further related: “The NRF Act in its current formulation was a piece of legislation which was very poorly conceived, and was ‘rammed down the throats’ of the nation during a period when the APNU+AFC was in a state of illegality and illegitimacy.”
Minister of Natural Resources, Vickram Bharrat, had said that with amendments to the NRF, the government is seeking to ensure transparency and accountability in relation to withdrawals and deposits.
He noted too that the government will be doing everything in its power to ensure that Guyana does not fall prey to the infamous Dutch Disease.
Bharrat said that the government will be utilising the oil revenues to accelerate growth in critical non-oil sectors such as agriculture, health, education and the social services.
As part of a more short-term projection, Guyana could begin facilitating up to 50 oil lifts per year at one million barrels per lift, thereby producing 50 million barrels of oil annually.
These increased lifts, Minister Bharrat had indicated, are possible with the intended arrival and operation of three additional Floating Production Storage and Offloading (FPSO) vessels. Those include the Liza Unity, which is expected to arrive in November; the Prosperity FPSO which is currently under construction; and the Yellowtail FPSO which is slated to come on stream by 2026.
Further, with crude prices hovering at US$80 a barrel, Guyana would earn as much as US$4,000,000,000 (GYD$836,902,800,000) each year for its 50 oil lifts.
“So, when you crunch the numbers, 50 lifts at a million barrels, and based on the oil price today, if it continues along that trend, you can see or get an idea of the direct proceeds coming to Guyana,” Minister Bharrat said in a recent interview with OilNow.
He also reminded that the aforementioned earnings are outside of other benefits such as royalties, which could see a mammoth increase in the country’s overall oil earnings. “We are not even talking royalties yet,” Minister Bharrat related.
To this end, he said that Guyana could comfortably close the year with close to US$600 million in the NRF